Today Is 4-15; It's A Taxing Matter!

It's time to Break It Down!

The day many have dreaded has finally arrived. Once again, the title is self-explanatory. In any language, if you are an American, 4-15 is coded numeric nomenclature for April 15th; commonly known as Tax Day, or the deadline to File Federal Tax information, thereby informing the Internal Revenue Service (IRS) of all income amassed during the previous calendar year. The purpose of this submittable is to determine tax liability for the year.

It may seem as though taxes have been around forever. Even the Bible references taxes…in Matthew (22:21), Mark (12:17), Luke (20:25), and Romans (13:7), where Jesus’ directive is explicit; “Render to all what is due them: tax to whom tax is due; custom to whom custom; fear to whom fear; honor to whom honor.” (New American Standard Bible, Copyright 1995)

In spite of this historic basis for taxation, the American experiment with the revenue stream is relatively new, and also surprisingly sporadic…in the grand scheme of things. Income tax was first levied in the United States in 1861, at a rate of 3% on income above $800 annually. Gauging by the year, you might guess, the resulting income was used to provide funding for the Civil War, which kicked off with the first hostilities April 12, 1861.

The initial American flirtation with an income tax was relatively brief. In 1872, the law was ruled unconstitutional, and repealed. The Revenue Act of 1894 introduced a 2% tax on personal income. However, the question of constitutionality lingered. The question would not be resolved until 1913, with the ratification of the Sixteenth Amendment to the United States Constitution, clearing the way for a an early version of the income tax system we are familiar with today.

Even after clearing the way, and establishing the basic framework for the income tax system, a number of aspects have been adjusted over time. There have been several significant fluctuations in the top rate for example. Interestingly, the rates have been particularly high during great crises; the First and Second World Wars, and during the Depression. Though counterintuitive, there may actually be a precedent for President Obama’s plan to increase the rate for the highest earners during our current economic turmoil.

There has also been a fair amount of volatility regarding the date of Tax Day. With the advent of the modern system, Tax Day was fixed on March 1st, in 1913. It was subsequently moved to March 15th, in 1918, and moved again to April 15th, in 1955, where it remains today. A filing extension is provided when April 15th falls on a weekend, a civil holiday, or when a significant weather event makes it a hardship to file on that day.

The last extension occurred in 2007, when the date was set for Tuesday, April 17th, because the 15th was a Sunday, and the 16th was a holiday (Emancipation Day in Washington, DC). The next scheduled extension will occur in 2012, when Tax Day will be observed on Tuesday, 17th, for the same reason as in 2007.

There are always interesting facts and related details associated with Tax Day. This year for the first time in ages, Tax Freedom Day actually preceded Tax Day on the calendar. Tax Freedom Day is the day when the Tax Foundation, a non-partisan tax research group, calculates that we will have earned enough to pay our collective federal, state, and local tax obligations. The 2009 day was Monday, April 13th, eight days earlier than last year, and two weeks earlier than two years ago. In fact, this was the earliest it’s been in forty-two years.

The world as we know it is largely consumed by economic malaise. One spin-off of the times is a move to spawn tax protest tea parties, loosely inspired by the original Boston Tea Party. Organizers in cities across the country are busy at work in an effort to make a resounding political statement in the face of the massive spending bills, and various bailout efforts endorsed by the President, and approved by Congress.

A poignant, but not-so-well-known, irony is that federal revenues as a share of gross domestic product (GDP) will be lower than any year since 1950, according to the Congressional Budget Office. Once again, to put it in perspective, much as the notion is false that the tax code is as old as America, it is also a misrepresentation to assert that America is a high tax nation.

In 2006, federal state and local taxes amounted to 28% of the American Gross Domestic Product, 26th out of 30 countries in the Organization for Economic Cooperation and Development (OECD). Only Japan, Korea, Turkey, and Mexico were lower. The top two countries, Denmark and Sweden were over 49%; the top 23 were over 30%.

In terms of top statutory tax rate Americans were 16th, our highest measure. In personal income tax on the average worker, Americans were 25th. Finally, for income tax less cash transfer payments, Americans were 18th. In all four measures, Americans fell in the bottom half of the thirty countries.

Now all that is quite interesting, but it does not mean a thing if you have yet to file your taxes. So, if you have, relax and enjoy a cold beverage. If not, what are you waiting for? Today is “4-15; A Taxing Matter” awaits you! By the way, just in case you haven’t done your taxes, and you are thinking of filing an extension…and you owe, don’t forget to send your estimated payment. The paperwork work can wait, but Uncle Sam wants you(r) money now!

"Today is 4-15; It’s a Taxing Matter!" I’m done; holla back!

Read my blog anytime by clicking the link: http://thesphinxofcharlotte.blogspot.com/. A new post is published each Wednesday.

For more detailed information on a variety of aspects relating to this post, consult the links below:

http://www.irs.gov/newsroom/content/0,,id=104608,00.html

http://www.taxday.biz/blog/2009/02/2009-tax-refund-schedule.html

http://www.timeanddate.com/holidays/us/tax-day

http://www.efile.com/tax-day/tax-day.asp

http://www.gather.com/viewArticle.jsp?grpId=3659174697244816&articleId=281474977655775&nav=Groupspace

http://money.cnn.com/2009/04/09/pf/taxes/late_filers/index.htm?postversion=2009040905

http://dontmesswithtaxes.typepad.com/dont_mess_with_taxes/2009/04/tax-freedom-day-2009-ealiest-ever.html

http://www.huffingtonpost.com/2009/04/06/anti-tax-tea-party-protes_n_183814.html

http://www.forbes.com/2009/04/09/tea-party-taxes-opinions-columnists-bartlett.html

http://www.usatoday.com/news/washington/2009-04-12-teaparties12_N.htm